AG backs Treasury’s move against sale of land to Airtel

Telecoms service provider Bharti Airtel’s bid to acquire land in Nairobi for its Africa headquarters suffered another setback last Wednesday after the Attorney-General advised against non-competitive sale of the property to the Indian firm.

In a legal opinion offered at the request of Postmaster-General Hussein Ali, Githu Muigai, the Attorney General (AG), supported the anti-graft watchdog, KACC and the procurement authority in insisting that sale of the prime land belonging to the Postal Corporation of Kenya be done through competitive tendering as required by law.

The AG’s advice against direct sale of the land to the firm that has the backing of President Kibaki and Prime Minister Raila Odinga sets a precedent in the executive arm of government and a clear signal to foreign investors seeking to set base in Kenya that there is no longer room for special treatment in such matters.

More fundamentally, it represents a shift in the way that the AG’s office has in the past dealt with the presidency, setting it up as a bold and independent government advisor.

Prof Muigai’s advice came as it emerged that the Treasury had earlier given its support to the direct sale before changing its view to back open tendering.

“We are, therefore, of the considered view that in the interest of fair competition, promotion of integrity, transparency and accountability, the land in question should be disposed of in accordance with the provisions of the Public Procurement and Disposals Act,” Prof Githu said in the letter to Maj Gen (rtd) Ali copied to Treasury permanent secretary Joseph Kinyua.

The postmaster-general had on Tuesday sought the AG’s legal opinion on the matter in the face of heavy political pressure to conclude the transaction and strong opposition from key arms of the government, the Treasury and the anti-corruption commission.

Former KACC director-general PLO Lumumba had written two letters to Ali warning against direct sale, a view shared by the Public Procurement Oversight Authority (PPOA) chief, Maurice Juma.

Information permanent secretary Bitange Ndemo had insisted that the sale must go on as directed by the two principals, saying its collapse would hurt Kenya’s image as an investment destination.

“I have escalated the matter so that we find a solution to this issue.

It is unfortunate that we can fail to execute a directive from our leadership. I am convinced there is another agenda all together which in my view would hurt this country as an investment destination,” Dr Ndemo had said.

The AG also took note of King Realtors Limited’s $10 million (Sh940 million) offer for the plot and a dispute over the same land between the Postal Corporation and Mall Developers.

“We are not privy to the facts of the ongoing arbitration…between PCK and Mall Developers, but it buttresses the point that the said property is disposed of in accordance with the law,” Prof Muigai said.

Airtel had offered Sh543 million for the piece of land in the Hurlingham area of Nairobi where it also plans to build a business process outsourcing centre.

PCK’s board, which includes Dr Ndemo, is now expected to sit and consider the AG’s opinion.

Prof Muigai is the chief legal advisor to the government and failure to consider his opinion would leave board members exposed should the sale go on and is challenged in a court of law in future.

What emerges from the trail of confidential communication — including the AG’s letter — is that the intended sale has polarised top public officials, with politicians in support while technocrats, with the exception of Dr Ndemo, urging caution.

The fact that Prof Muigai chose to communicate his position to Ali and Mr Kinyua shows that he is placing responsibility on the shoulders of technocrats.

President Kibaki and Mr Odinga had committed to delivering the land to Airtel, the main reason PCK sought the AG’s interpretation to avoid future liability. Since the promise was made to Airtel last year, politicians have not given any hint that they care about the legal queries raised over the deal.

On January 19, nearly five months after the official launch of Airtel in Kenya, Information minister Samuel Poghisio wrote to Finance minister Uhuru Kenyatta to inform him that the PCK board backed the arrangement and was rewarded with a reply (the same day) that Treasury had no objection.

Mr Poghisio reported that the PCK board had no objection although people familiar with the matter are not convinced he was entirely supportive of the arrangement.

While PCK board resolved to support the sale after Dr Ndemo briefed it of the government position on September 22, it has emerged that nine days earlier, the same board in a special meeting held on September 13 had supported the legal opinion offered by KACC and PPOA.

Both insisted the sale had to comply with Public Procurement and Disposal Act (PPDA) 2005, which bars sale to a predetermined person or group.

It is now clear that political pressure had informed the board’s change of tune, hence Mr Poghisio’s communication to the Treasury.

Maj Gen Ali reminded Dr Ndemo of the special meeting resolutions on January 6, 2010, despite the PS being a member of the board chaired by Cyrus Maina.

The post-master general indicated that he had all along held reservations over the proposed deal. Sources at the PCK headquarters reported that Ali was relieved by the AG’s advice.

The advice relied on PPDA and the State Corporations Act. Section 13 of the Act allows parastatals to dispose of assets with the permission of the minister and the Treasury.

But Prof Muigai insisted that it had to be read together with the Public Property Disposal Act.

“Although PPDA does not expressly state the procedure for disposal of real estate, its definition of ‘disposal’ includes divestiture of public assets which would be interpreted to include real estate,” the AG wrote in his three-page opinion.

Dr Ndemo had in an earlier interview with the Business Daily asserted that the Act does not address disposal of land.

“Procurement Act 2005 does not have provision for disposal of public property such as land. Disposal of such property is taken care of by the State Corporation Act and it is detailed and elaborate,” Dr Ndemo had said.

But Prof Muigai cited Section 5 of the PPDA as saying that in case of conflict with any other law “in matters relating to procurement and disposal” the Procurement Act prevails.

As we went to press Airtel had not answered our second email since last week.mwahome@ke.nationmedia.com